Economy & Market
Cement firms may have to pay at Rs 2,100-cr fine
India's top four cement makers ACC, Ambuja Cement, UltraTech Cement and Shree Cement - may have to shell out Rs 2,198 crore, if the Competition Commission of India (CCI) charges a penalty of eight per cent on the average turnover of the last three years. The companies have been charged with inflating prices and reducing production.
The penalty, if levied, will weigh heavily on the companies, particularly when the prices are on the downtrend due to lower demand and excess production capacity added in the last few years.
Considering that the CCI started investigation in 2011, it will take into account the average turnover from 2010 to 2008 for calculating the penalty. ACC's average turnover between 2008 and 2010 was Rs 8,150 crore. An eight per cent penalty will work out to Rs 652 crore. Similarly, the penalty for Ambuja Cement could amount to about Rs 552 crore considering its average turnover of Rs 6,896 crore.
The fine on UltraTech Cement could be about Rs 731 crore on its turnover of Rs 9,142 crore excluding Grasim Industries cement business revenue. (As part of consolidation, the Aditya Birla Group in 2010 merged cement business of Grasim with UltraTech.) The percentage of penalty levied on smaller cement companies may be lower because they generally do not have the pricing power, said an analyst.
Analysts expect the companies to file an appeal with the Appellate Tribunal against the penalty.